A firm has just issued (January 1, 2018) a bond that has a face value of $1,000, acoupon rate of 7 percent paid semi-annually (June 30, December 31), and maturesin 10 years. The bonds were issued with a yield to maturity of 6%. What pricewere the bonds issued at? Assume that on July 1, 2020, the bond trades to earnan effective yield of 9%. At what price should this bond be trading for onJuly 1, 2020?

Bond value is the current worth of a bond calculated by discounting all the cash flows receivable…

Answered: A firm has just issued (January 1,…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

See similar textbooks

Similar questions

the 15-year $1,000 par bonds of Vail Inc. pay 15 percent interest. The market's required yield to maturity on a comparable - risk bond is 18 percent. The current market price for the bond is $910. a. determine the yield to maturity b. what is the value of the bonds to you given the yield to maturity on a comparable - risk bond? c. should you purchase the bond at the current market price?
You find the following corporate bond quotes. To calculate the number of years until maturity, assume that it is currently January 15, 2022. The bonds have a par value of $2,000 and semiannual coupons. Company (Ticker) Xenon, Incorporated (XIC) Kenny Corporation (KCC) Williams Company (WICO) Coupon 6.300 7.210 ?? a. Price b. Current yield Maturity January 15, 2043 January 15, 2037 January 15, 2039 % Last Price Last Yield 94.291 ?? 6.20 ?? 94.825 7.02 Estimated $ Volume (000s) 57,371 a. What price would you expect to pay for the Kenny Corporation bond? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. b. What is the bond's current yield? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. 48,950 43,811
On September 27, 2015, Koala, Inc. issued a 10 year bond (with a typical $1,000 face value) that had an annual coupon value of $65. [We are assuming that the 2021 coupon has just been redeemed.] Initially, the bond was sold at a discount price of $978. • On September 27, 2021, this bond was selling at a premium for $1,010. • The market rate of interest for a riskless corporate bond, of this maturity (i.e., a Treasury security), was 2.8% on September 27, 2015, which reflects market expectations about future rates of inflation. • The market rate of interest for a riskless corporate bond, of this maturity (i.e., a Treasury security), was 1.9% on September 27, 2021, which reflects market expectations about future rates of inflation. 1. What was the nominal yield on this bond on September 27, 2015? [To 1 decimal place.] 2. What was the current yield on this bond on September 27, 2015? [To 3 decimal places.] 3. What was the yield to maturity for this bond on September 27, 2015? [To 2 decimal…
Today is 1 July, 2022, Georg plans to purchase a corporate bond with a coupon rate of j2 = 1.8% p.a. and a face value of $100. This corporate bond matures at par. Its maturity date is 1 January, 2025. The yield rate is assumed to be j2 = 11.9% p.a. Assume that this corporate bond has a 5% chance of default in any six-month period during its term. Assume, also, that, if default occurs, Georg will receive no further payments at all. Calculate Georg's purchase price. Round your answer to three decimal places. O a. O b. $79.790 O c. $61.241 O d. $55.718 a. $78.509
You find the following corporate bond quotes. To calculate the number of years until maturity, assume that it is currently January 15, 2022. The bonds have a par value of $2,000 and semiannual coupons. Company (Ticker) Xenon, Incorporated (XIC) Kenny Corporation (KCC) Williams Company (WICO) Coupon 7.200 7.300 ?? a. Price b. Current yield Maturity January 15, 2039 January 15, 2033 January 15, 2035. % Last Price Last Yield 94.399 ?? ?? 6.38 94.915 7.20 Estimated $ Volume (000s) a. What price would you expect to pay for the Kenny Corporation bond? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. b. What is the bond's current yield? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. 57,380 48,959 43,820
On 5/15/2008, the thirty-year T-bond with a coupon of 5.00%, and maturing on 5/15/2038 was quoted at a clean price of 102.50. The general collateral repo rate for a term of one month was 4.775%. Your investment bank receives an order from a client to buy this bond forward in one month’s time. What is the forward price that you should quote? Why? How should your desk hedge itself assuming that the deal is done on May 15, 2008?
You find the following corporate bond quotes. To calculate the number of years until maturity, assume that it is currently January 15, 2022. The bonds have a par value of $2,000 and semiannual coupons. Company (Ticker) Xenon, Incorporated (XIC) Kenny Corporation (KCC) Williams Company (WICO) Coupon rate Coupon 7.000 7.280 ?? % Maturity January 15, 2041 January 15, 2035 January 15, 2037 Last Price Last Yield 94.375 ?? 94.895 ?? 6.34 7.16 Estimated $ Volume (000s) 57,378 What is the coupon rate for the Williams Company bond? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. 48,957 43,818
Calculate the yield to maturity on the following bonds: A 9.4 percent coupon (paid semiannually) bond, with a $1,000 face value and 19 years remaining to maturity. The bond is selling at $965. An 8.4 percent coupon (paid quarterly) bond, with a $1,000 face value and 10 years remaining to maturity. The bond is selling at $901. An 11.4 percent coupon (paid annually) bond, with a $1,000 face value and 6 years remaining to maturity. The bond is selling at $1,051. (For all requirements, do not round intermediate calculations. Round your percentage answers to 3 decimal places.
Crazy Racoon Fur Trading Company issued a 20-year bond on May 15, 2018 with a 6.00% coupon. The bond pays interest semi-annually (5/15 and 11/15) with no special covenants (puts, calls, etc.). The bond will pay off at par (100.00%) or face value at maturity. You decide to purchase the bond and the trade is going to settle on August 30, 2020. On that date.... a. What is the price of the bond if the yield to maturity is 6.00%? b. What is the price of the bond if the yield to maturity increases to 7.00%? c. What is the price of the bond if the yield to maturity falls to 5.00%? Settlement date 08/30/20 Maturity date 05/15/22 Annual coupon rate 6.000% Yield to maturity 6.000% Redemption value as % of par valu 100.00 Number of coupons per year 2 BOND PRICE CALCULATOR $1,000.00 $1,000.00 CORRECT! $981.19 $962.89
On February 9, 2015, Hunter-Gratzner, Inc. issued a 10 year bond (with a typical $1000 face value) that had an annual coupon value of $42. We will assume that the 2022 coupon has just been redeemed. Initially (in 2015), the bond was sold at the premium price of $1,037. On February 9, 2022, this bond was selling for $972. The market rate of interest for a riskless corporate bond, of this maturity (i.e., a U.S. Treasury security), was 1.75% on February 9, 2015, which reflected market expectations about future rates of inflation. The market rate of interest for a riskless corporate bond, of this maturity (i.e., a U.S. Treasury security), was 2.05% on February 9, 2022, which reflects market expectations about future rates of inflation. Question: What was the yield to maturity for this bond on February 9, 2015? [To 2 decimal places.]
Today is 1 July, 2022, Georg plans to purchase a corporate bond with a coupon rate of 2 1.25% p.a. and a face value of $100. This corporate bond matures at par. Its maturity date is 1 January, 2025. WIThe yield rate is assumed to be 2 15.8% p.a., Assume that this corporate bond has a 8% chance of default in any six-month period during its term. Assume, also, that, if default occurs, Georg will receive no further payments at all. Calculate Georg's purchase price. Round your answer to three decimal places. a. S72.957 b. S70.676 C. $47.051 d. $40.650

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS